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Note 5 - Financial Instruments Measured at Fair Value

9 Months Ended

Sep. 24, 2022

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block]

5.	Financial Instruments Measured at Fair Value

Our cash, cash equivalents, and short-term investments consisted primarily of cash and other investment grade securities. We do not hold investment securities for trading purposes. All short-term investments in debt securities are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk and we monitor credit risk and attempt to mitigate exposure by making high-quality investments and through investment diversification.

We assess whether unrealized loss positions on available-for-sale debt securities are due to credit-related factors. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in earnings through an allowance account. Unrealized gains and losses that are not due to credit-related factors are included in accumulated other comprehensive income (loss). Factors that could indicate an impairment exists include, but are not limited to earnings performance, changes in credit rating or adverse changes in the regulatory or economic environment of the asset. Gross realized gains and losses on sales of short-term investments are included in interest income. Realized gains and losses for the periods presented were not significant.

Investments that we have classified as short-term, by security type, are as follows (in thousands):

	September 24, 2022
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses⁽¹⁾		Value
Corporate debt securities⁽²⁾	$	72,632	$	6	$	371	$	72,267
U.S. treasury securities		32,522		-		422		32,100
Bank certificates of deposit		23,325		9		51		23,283
Foreign government security		783		-		-		783
Asset-backed securities		8,624		-		74		8,550
	$	137,886	$	15	$	918	$	136,983

	December 25, 2021
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses⁽¹⁾		Value
Corporate debt securities ⁽²⁾	$	84,060	$	2	$	31	$	84,031
U.S. treasury securities		3,953		-		5		3,948
Bank certificates of deposit		800		-		-		800
Foreign government security		925		-		-		925
	$	89,738	$	2	$	36	$	89,704

(1)

As of September 24, 2022, the cost and fair value of investments with loss positions was approximately $119.3 million and $118.4 million, respectively. As of December 25, 2021, the cost and fair value of investments with loss positions was approximately $57.0 million. We evaluated the nature of these investments, credit worthiness of the issuer and the duration of these impairments to determine if an other-than-temporary decline in fair value had occurred and concluded that these losses were temporary and we have the ability and intent to hold these investments to maturity.

(2)

Corporate debt securities include investments in financial and other corporate institutions. No single issuer represents a significant portion of the total corporate debt securities portfolio.

Effective maturities of short-term investments are as follows (in thousands):

	September 24, 2022				December 25, 2021
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	112,027	$	111,625	$	83,429	$	83,408
Due after one year through three years		25,859		25,358		6,309		6,296
	$	137,886	$	136,983	$	89,738	$	89,704

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. When available, we use quoted market prices to determine the fair value of our investments, and they are included in Level 1. When quoted market prices are unobservable, we use quotes from independent pricing vendors based on recent trading activity and other relevant information, and they are included in Level 2.

The following table summarizes, by major security type, our financial instruments that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in thousands):

	Fair value measurements at September 24, 2022 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	152,841	$	-	$	-	$	152,841
U.S. treasury securities		-		32,100		-		32,100
Corporate debt securities		-		80,744		-		80,744
Asset-backed securities		-		8,550		-		8,550
Money market funds		-		71,080		-		71,080
Bank certificates of deposit		-		23,283		-		23,283
Foreign government security		-		783		-		783
	$	152,841	$	216,540	$	-	$	369,381

	Fair value measurements at December 25, 2021 using:
							Total estimated
	Level 1		Level 2		Level 3		fair value
Cash	$	195,297	$	-	$	-	$	195,297
Corporate debt securities		-		86,535		-		86,535
U.S. treasury securities		-		3,948		-		3,948
Money market funds		-		92,400		-		92,400
Bank certificates of deposit		-		800		-		800
Foreign government security		-		925		-		925
	$	195,297	$	184,608	$	-	$	379,905